Finding Text
FINDING 2024-001
Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Suspension and Debarment
Federal Agency: Department of the Treasury
Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds
Assistance Listings Number: 21.027
Federal Award Number and Year (or Other Identifying Number): ARP Act
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Repeat Finding
This is a repeat finding from the immediately prior audit report. The prior audit finding number was
2023-001.
Condition and Context
During the audit period, COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF)
totaling $5,647,762 were expended under the water, sewer, and broadband eligible use categories. All of
the transactions were subject to suspension and debarment provisions.
Prior to entering into subawards and covered transactions with the SLFRF award funds, recipients
are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise
excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded
under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000.
The verification is to be done by checking the Excluded Parties List System (EPLS), collecting a certification
from that entity, or adding a clause or condition to the covered transaction with that person.
The City's policies related to suspension and debarment requirements included the Executive
Secretary of the Engineering and Board of Works (Executive Secretary) verifying the SAMS exclusions.
The City entered into one contract with one vendor for one project under the water, sewer, and broadband
eligible use category during the audit period. Total payments made to the vendor during the audit period
were $5,647,762, all of which were subject to suspension and debarment requirements. Per inquiry with
the City, the Executive Secretary verified the vendor was not suspended or debarred by checking the SAMs
exclusions; however, documentation of the verification was not retained. As such, we could not determine
if the City complied with the suspension and debarment requirements.
Criteria
2 CFR 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over the Federal award that provides
reasonable assurance that the non-Federal entity is managing the Federal award in
compliance with Federal statutes, regulations, and the terms and conditions of the Federal
award. These internal controls should be in compliance with guidance in 'Standards for
Internal Control in the Federal Government' issued by the Comptroller General of the
United States or the 'Internal Control Integrated Framework', issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). . . ."
31 CFR 19.300 states:
"When you enter into a covered transaction with another person at the next lower tier, you must
verify that the person with whom you do business is not excluded or disqualified. You do this
by:
(a) Checking the EPLS; or
(b) Collecting a certification from that person if allowed by this rule; or
(c) Adding a clause or condition to the covered transaction with that person."
Cause
A proper system of internal controls was not implemented by management of the City. Policies
over suspension and debarment requirements were in place; however, the procedures did not address the
retention of documentation. As such, the City was unable to provide documentation to demonstrate they
checked SAM.gov to verify that the contractor was not suspended or debarred prior to payment.
Effect
Without the proper implementation of an effectively designed system of internal controls, the City
cannot ensure contractors paid with federal funds are eligible to participate in federal programs. Any
program funds the City used to pay contractors that have been suspended or debarred would be
unallowable and the funding agency could potentially request repayment of funds previously provided to
the City. Furthermore, noncompliance with the provisions of federal statutes, regulations, and terms and
conditions of the federal award could result in the loss of future federal funding to the City.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the City strengthen its system of internal controls to ensure
that all contractors paid $25,000 or more, all in or in part with federal funds, are not suspended, debarred,
or otherwise excluded from participating in federal programs and ensure appropriate supporting documentation
for federal programs is retained for audit.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.